Asymmetric Information in Financial Markets: Anything Goes

Speculation and Hedging in Segmented Markets

“…Garcia and Strobl (2011) study how relative wealth concerns affect investors' incentives to acquire information. Veronesi (2000, 2008) and Breon-Drish (2011) generate strategic complementarities with non-normally distributed asset payoff structures. Our paper proposes a different mechanism for strategic complementarities in financial markets-namely that traders, who have related pieces of information but have different investment opportunity sets, may wish to trade an asset in different directions, thereby reducing price informativeness.…”

Reprint of: Information percolation in segmented markets

“…For example, in the standard setting of Grossman and Stiglitz [23], there is never complementarity in information acquisition. Breon-Drish [7], however, shows that a relaxation of the normality assumption of Grossman and Stiglitz can, under some additional conditions, lead to strategic complementarity in information acquisition in a standard central-market rational expectations equilibrium. They show that such equilibria are unstable whenever there is strategic complementarity in information acquisition.…”

“…Thus, the information type of a collection of signals is one-toone with the conditional probability that Y = 0 given the signals. 7 More precisely, there is a continuum of signals, indexed by a non-atomic measure space, say [0, 1]. More generally, we will use the following result from Duffie and Manso [12].…”

“…See, for example,[22,23,47,33,44,36,37] 2. See, also, Barlevi and Veronesi[4] and other sources cited by Breon-Drish[7].…”

Information Diversity and Market Efficiency Spirals

“…Finally, our model contributes to the literature studying sources of strategic complementarities in financial markets, by highlighting a different mechanism by which such complementarities arise. Other papers in this literature include: Barlevy and Veronesi (2000), Ganguli and Yang (2009), Garcia and Strobl (2010), Goldstein, Ozdenoren, and Yuan (2010), Mele andSangiorgi (2010), andBreon-Drish (2011).…”